About

Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Wednesday, 20 May 2015

Grexit will eventually happen, time to position for the next big move in the market

After #Greece defaulted on the #IMF, Greeks rejected the austerity plan proposed by the EU comprehensively. We now have had a bailout package for Greece. The IMF has expressed concerns about joining the bailout adding to the uncertainty. Eventually after all the bailouts a #Grexit may prove to be the only way out. Regardless some key markets are poised for big moves:

Let us take a look at the #Euro first. The Euro appears to have put in a near term top near it's recent highs near the 1.16 level and has been correcting lower. It appears to be poised for a big move and has already corrected below the 1.13 level. Like the Euro 1.11 put with the 1.13 call as a hedge.

EUR/USD (EURUSD=X)
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Next let us look at #oil which has broken down from its highs near 62$.
Can play the next move likely to the downside to 40$ via the oil 44 put with the 46 call as a hedge or via a strangle on the oil ETF USO. Oil will likely head to 35 in the upcoming months.
United States Oil ETF (USO)
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Moving onto gold, #Gold seems to be headed for new lows after breaking the 1100 mark. Following the news flow out of Greece and the strong dollar further weakness looks likely despite the recent flight to safety bid. Like the 108 put on the Gold ETF GLD, The 110 call may be considered as a hedge:
SPDR Gold Shares (GLD)


Not to forget the #SandP500, which has corrected from its recent highs near 2135 to about 1867. A short term down move to 1900 appears on the cards and can be played via a 1970 put with a 2010 call as a hedge.
S&P 500 (^GSPC)

dowjones
 Finally the #Nifty has been breaking down from its recent highs near 8650. Can trade the next big move down to 7800 via the 7900 put with the 8100 call as a hedge.
CNX NIFTY (^NSEI)

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Cash - 40%
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My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.